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Economists stay cautious even as Singapore readies to unveil another round of relief measures in Solidarity Budget

Amala Balakrishner
Amala Balakrishner4/5/2020 05:45 PM GMT+08  • 4 min read
Economists stay cautious even as Singapore readies to unveil another round of relief measures in Solidarity Budget
Some 1.3 million workers could go into “cold storage” as Singapore goes on a month-long circuit breaker.
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SINGAPORE (Apr 5): Businesses and households can look forward to another slate of relief measures that will be “over and above” the $55 billion already doled out to help Singapore weather the Covid-19 storm.

Deputy Prime Minister and Finance Minister Heng Swee Keat will unveil this third round of relief measures when Parliament sits on Monday.

Already, Singapore had announced relief measures in Budget 2020 on Feb 18 and the supplementary “Resilience Budget” on March 26, which served to inject a much-needed boost into the city state’s ailing sectors, including aviation, tourism and hospitality.

They were also aimed at keeping businesses afloat, with employers receiving increased co-payment of their employees’ salaries. Individuals and households, too, were to receive more handouts.

While the measures from the two packages were noted to already come up to 11% of Singapore’s gross domestic product (GDP), it might still not be enough.

“The Covid-19 situation has taken a very sharp turn,” Heng said in a Facebook post on Sunday. “Strong measures have to be taken to protect lives, but the economy has taken a hit as a result.”

The third round of relief measures – dubbed the “Solidarity Budget” to symbolise Singaporeans standing together in this difficult time – comes as Singapore on Friday announced stricter restrictions that will include closing most workplaces and schools.

The month-long “circuit breaker” will see most workplaces – with the exception of essential services and key economic sectors such as food establishments, markets and supermarkets, clinics, hospitals, utilities, transport and key banking services – closed with effect from April 7.

See: Singapore to close most workplaces, schools in 'circuit breaker' to curb virus spread

In light of the restrictions, Heng said the Solidarity Budget will look to “help businesses retain their capacity and their workers, so that they can resume activities once the circuit breaker is lifted”.

“We will also give additional support to households and vulnerable groups,” he added. “These are already trying times and the additional measures will add to [people’s] burden. Workers are also worried about their jobs and livelihoods. I understand your anxieties.”

With non-essential businesses and other activities being stood down for a month, economists say the measures to come may do little to prevent the city state from slipping into a recession.

Chua Hak Bin, a senior economist at Maybank Kim Eng, estimates that the non-essential services sector accounts for 30% of the republic’s GDP. And the month-long closure is expected to cost $10 billion, or 2% of GDP.

Meanwhile, he estimates that some 1.3 million workers could go into “cold storage” during this period.

“Many firms will not be able to carry the costs of workers, rents and other obligations for a month, even with the additional government support,” Chua said.

Drawing reference to the unemployment levels of 3.3% during the peak of the 1997/1998 Asian Financial Crisis (AFC) and the 2008/2009 Global Financial Crisis (GFC), Chua cautions that Singapore’s resident unemployment rate will climb to around 3.5% – from the current 2.3%.

Job losses, he added, could spike as high as 80,000 this year – “far greater than even the magnitudes seen during the AFC or GFC”. At the height of the crises, layoffs here hit 28,300 in 1998 and 23,430 in 2009.

Meanwhile, Singapore’s linchpin manufacturing sector is not in a position to cushion the extent of a slowdown even if it is business-as-usual for factories, observes United Overseas Bank (UOB) economist Barnabas Gan.

Amid a massive disruption in global supply chains from reduced production and consumer demand, he expects the sector to tank 3.8% this year.

Given the bleak economic outlook, economists are counting on DPM Heng to dole out measures to boost job security for households and cashflow issues for businesses.

The next wave of support is slated to “save as many jobs as possible by broadening the relief measures and job support schemes since this global recession is hitting virtually every sector and industry, [more so] since Singapore is in a semi-official lockdown,” CIMB economist Song Seng Wun points out.

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